Bitcoin (BTC) is painfully close to recording an ominous first in its 14-year history: its premiere “death cross” on the weekly price chart.
Two major moving averages (MA) are about to converge: its 200-week and its 50-week. Technical analysis suggests it is extremely bearish for the 50-week MA to cross below a 200-week MA — hence the “death” part.
Death crosses are lagging indicators. The pattern is typically used by investors and traders as a signal that a trend change from bullish to bearish is about to, or has, taken place.
Bitcoin switched from a heady bull market to a stifling bear market sometime in late 2021 or early 2022 — the impending death cross would solidify that switch and mark the most visceral reversal in its history.
Bitcoin narrowly avoided a death cross back in November 2015 (the early days of a bull run), when just $9.96 separated the 50-week and 200-week MAs ($9.96 was about 2.6% of bitcoin’s price at the time).
As of 12:50 am, ET, just $115 separated the two. That’s just 0.5% of bitcoin’s price — its closest ever point.
Death crosses can be seen on any asset chart. Following the bursting of the dotcom bubble — in Sept. 2001 — the S&P 500 printed such a pattern about a year and a half after the index peaked. Prices eventually bottomed out 300 days later.
It’s important to note that technical analysis should not be used in isolation. And depending on who you ask, technical analysis is either useful or junk science (Blockworks requested comments from three different analysts about the death cross — all declined to weigh in on technical analysis).
Still, charting remains popular in crypto circles as there’s often little else to go on (fundamental analysis remains elusive in crypto compared to traditional equities, which boast price-to-earnings, price-to-book ratios and other useful metrics).
Ether (ETH), on the other hand, is still some ways from printing such a melancholic pattern. Although it has seen a weekly death cross before: in June 2019, one and a half years after 2017-2018 bull market topped out.
Some 18 months later, ETH’s 200MA and 50MA would conversely cross “bullish” in December 2020 with a so-called “golden cross” — the opposite of a “death cross.”
Crypto sprung back to life around the same time.
It’s not all gloom and doom for bitcoin. Chartists are right now frothing over a supposedly bullish golden cross on bitcoin’s daily moving averages, which occurred earlier this week, proving technical analysis can be a “glass-half-full-half-empty” discipline.
David Canellis contributed reporting.
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